DEFENCE and aerospace giant BAE Systems has thanked a robust performance by North Wales-based Airbus for helping its profits take off in the first half of the year.

BAE, which has a 10% stake in the pan-European airline manufacturer, announced yesterday that its profits in the six months to June 30 had increased to #54m compared to #41m in 2002.

Sales were #5.7bn in the half year and the company has orders worth #46.4bn on its books.

Chief executive Mike Turner said, "We are making good progress and solid results in the first half which support our expectations and the markets' expectations for the full year."

BAE Systems's 20% stake in Airbus - which makes its aircraft wings at its 5,000-strong plant in Broughton, Deeside - is the main component of its commercial aircraft business.

About 60% of the company's work as a whole is now in electronic systems and software and support services.

The rest comes from its traditional military hardware business, including its Royal Ordnance plant in Glascoed, one of the largest employers in Monmouthshire.

In addition BAE makes the new Eurofighter Typhoon jet fighter.

The group's return to profitability comes after a number of high-profile calamities.

Back in February it signed revised agreements with the UK Government to overcome "serious difficulties" with contracts to build the Nimrod maritime-patrol aircraft and the Astute submarine - together worth almost #5bn.

With the Nimrod it was alleged that BAE had built some of the wings to the wrong size.

These difficulties followed poor results last year, which saw the group report its biggest losses since 1992.

But more recently, the UK Government decided to proceed with the acquisition from BAE of 44 new generation Hawk aircraft for the Royal Air Force.

The company said, "As previously indicated, we anticipate the underlying trading performance for the company's defence businesses to remain broadly in line with 2002, before taking account of the exceptional charges last year."

BAE Systems, with its headquarters in Hampshire, employs more than 90,000 people in 130 countries and generates annual sales of about #12bn.

The company said it had pumped #87m of cash into its pension fund during the first half. The fund's deficit under the FRS17 accounting stood at #2bn.

But despite the return to profitability, BAE still could not completely avoid controversy yesterday.

It was forced to deny allegations that it had operated a #20m "slush fund" designed to bribe Saudi Arabian officials into buying its defence products.

Mr Turner said, "We deny all such allegations. We operate in line with the laws of the United Kingdom and all other countries in which we operate."

A London newspaper reported yesterday that a letter had been sent by the head of the Serious Fraud Office to the Ministry of Defence concerning allegations of BAE Systems providing "sweeteners" for Saudi officials such as gambling trips, yachts and prostitutes.